E BW 2 1 3 3 E NT REP RENEURI A L F I NA NC E
LECTURE 2:
Business Plan
Learning units
Screening venture opportunities
Evaluating the business feasibility of an idea
Criteria for having sound business model
Key elements of a business plan
Introduction
E very new venture begins with an idea. Transforming the concept in one’s
mind into a product or service that satisfies, or creates and then satisfies, a
consumer need is the first step in the entrepreneurial process.
Only a small number of new business ideas become viable business opportunities
with funded business plans. We know that venture capitalists invest in only 1 to 3
percent of business plans presented to them. To survive the massive winnowing,
particularly when seeking professional venture capital, successful entrepreneurs
overcome substantially long odd.
HELLO IDEA!
SCREENING VENTURE OPPORTUNITIES
➢ A process of creating a useful qualitative and
quantitative assessments of an idea’s commercial
potential & its likelihood of producing revenue
growth, financial performance & value
PROCESS FOR IDENTIFYING BUSINESS OPPORTUNITIES
An entrepreneur may start a number of different types of businesses
including:
Salary-replacement firms
Firms that provide their owners with income levels comparable to what
they could have earned working for much larger firms
Lifestyle firms
Firms that allow owners to pursue specific lifestyles while being paid for
doing what they like to do
Entrepreneurial ventures
Entrepreneurial firms that are cash flow– and performance oriented
as reflected in rapid value creation over time
Existing competition
Market size/market share potential
Substitute products/services
Possibilities of new technologies
Recent/potential regulatory changes
International market possibilities
Two stage approach to assess a venture’s viability
Qualitative assessment: using systematic interview with
entrepreneurial team. Provides first building block for a
successful launch
Quantitative assessment: help determine whether venture
investors are likely to fund the transformation
- Founder
- Marketing manager
- Operations Manager
- Financial Manager
Factors evaluating new ventures:
Industry / Market
• Market size potential, industry barriers to entry
Pricing/Profitability
• Size of expected profit margins, accounting-based rates of returns (COGS,
gross profit, net profit, ROA)
Financial /Harvest
• Operating cash flow, FCF, Expected investment returns (IRR), potential for an
initial public offering (IPO)
Management Team
• Quality of management team
• Experience, expertise (Marketing, operations and Finance), networking
connections
From Entrepreneurial Opportunities To New
Businesses, Products, Or Services
Ideas Feasibility Business Plan
Business,
Societal Trends or Changes Product, or
New Business,
Demographic Trends or Changes Service
Opportunity Product, or
Technological Trends or Changes
Service
Other Sources (an unfilled
need)
Criteria for having a sound Business Model
Generates
Revenues
Produce
Make
free cash
Profits
flows
Key Elements Of A Business Plan
BUSINESS PLAN
1. A document that describes the proposed venture in terms of the
product or service opportunity, current resources & financial
projections
2. Sells the excitement, opportunity & rationale of your business idea to
you & other members of your management team, potential investors
& other stakeholders
3. Entrepreneur must be the first to believe the plan is workable
1. Executive Summary
A summary or overview of the other sections in the business
plan (brief description)
2. Business Description
Description of product or services
Industry background
Venture or firm background
Goals and milestone objectives
3. Marketing Plan and Strategy
Target market and customers
Competition and market share
Pricing strategy
Promotion and distribution
4. Operations and Support
Quality targets
Technology and requirements
Service support
5. Management Team
Experience and expertise
Organizational structure
Intellectual property rights
6. Financial Plans and Projections
Income statements and balance sheets
Statements of cash flow
Breakeven analysis
Funding needs and sources
7. Risks and Opportunities
Possible problems and risks
Real option opportunities
8. Appendixes
Detailed support for financial forecast
timeline and milestones
Example of a typical
business plan
outline
End of the Lecture!
